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2008年11月30日 星期日

Tuna in trouble

Nov 27th 2008From The Economist print edition

Anger that the catch will still be too big

ACCORDING to conservationists it is a disaster for the bluefin tuna, but as far as the European Commission is concerned it is a landmark decision to try to conserve their stocks. These are the opposing views of the outcome of a meeting this week in Morocco to set the allowable annual catch of the species, the population of which has tumbled because of overfishing, mainly by European fleets.

The organisation responsible for looking after tuna in the north-east Atlantic and the Mediterranean Sea, the International Commission for the Conservation of Atlantic Tunas (ICCAT), agreed to reduce the total allowable catch of bluefin in these areas from 28,500 this year to 22,000 tonnes next and to 19,950 tonnes in 2010, to give a total cut over two years of 30%. But this was considerably short of what many scientists—including some experts appointed by ICCAT—say is necessary. They wanted the catch to be limited to 15,000 tonnes. Some countries, including Spain, had wanted the fishery suspended altogether.

Oceana, an environmental group, said that with ICCAT ignoring its own scientific advice the future of the bluefin is now threatened, not least because in the past fishermen have taken around twice the permitted catch. The World Wide Fund for Nature, which has also been campaigning for a substantial cut in the catch, is now seeking an international trading ban on bluefin. It is urging a wider consumer boycott, too. Some restaurants have already banned the fish.

The European Commission, however, says it is satisfied with the consensus that was reached between the members of the group because the cut in the catch will be reinforced by a reduction in the fishing season and other methods of conservation. Enforcement will also be improved. This, says Joe Borg, the European commissioner for maritime affairs and fisheries, will mean more policing of the sale of tuna and the closure of loopholes in the regulations.

None of that is likely to satisfy the conservationists. Computer modelling of the species’s population earlier this year, by the Technical University of Denmark, concluded that, even if fishing for bluefin were banned, stocks in the north-east Atlantic and Mediterranean were so badly damaged that they would probably collapse anyway. Conservationists may now take another approach and try to persuade CITES, the international convention that regulates trade in endangered species, to put bluefin on its list of those threatened with extinction.

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November 26, 2008, 2:22 pm

The (Tuna) Tragedy of the Commons

There was new evidence early this week that the world has not yet absorbed just how deeply humans have depleted our “exhausted oceans.” At the latest meeting of the International Commission for the Conservation of Atlantic Tunas, created under a treaty 42 years ago to manage shared fisheries in that ocean, European governments ignored a strong recommendation from the group’s own scientific advisers for deep cuts in some harvests of the Atlantic bluefin tuna. On its face, that would seem to be a strange development considering that the organization’s Web site says flatly: “Science underpins the management decisions made by I.C.C.A.T.”

Sushi. (Tony Cenicola/The New York Times)

But such moves seem unremarkable, for now, in a world seeking to manage limited, shared natural resources while also spurring economic growth — whether the resource is the global atmosphere or an extraordinary half-ton, ocean-roaming predator. The European stance — insisting on a harvest in the eastern Atlantic and Mediterranean 50 percent above the limit recommended by scientists — was sharply criticized by environmental campaigners, marine biologists and United States fisheries officials. Some biologists criticized the United States, as well, for playing down the role of American fishers, both recreational and commercial, in destroying the once-bountiful fishery.

But the biggest focus was on Europe. Biologists and American fisheries officials blamed European governments for failing to shrink the huge fleets of boats from France (771), Italy (619), Spain (441), England (331) and elsewhere that are acknowledged, even by Europe, to be too large for the fishery. Environmental campaigners have repeatedly reported on rampant, enormous illegal catches in European and international waters, as well. Given that tagging studies have shown that the half-ton tuna can roam the full span of the Atlantic in seeking breeding and feeding grounds, the European position is widely seen by fisheries specialists as sending the fabled species spiraling further toward outright collapse. At the center of the fight, spurred largely by the worldwide sushi trade, is one of nature’s most magnificent, and endangered, experiments — a transatlantic torpedo that can sprint at highway speed while warming its brain with energy from its muscles.

I sought a reality check from Carl Safina, the noted marine biologist, founder of the Blue Ocean Institute, and prize-winning author of books on tuna, albatross and sea turtles.

He noted that the situation for the bluefins that frequent the American side of the Atlantic was in many ways worse than for those on the European side. Here’s how he described the continuing devastation of one of the world’s great, if underappreciated, predators (bold-face highlighting by me):

This Western stock is in much worse shape than the east, even though all the finger-pointing has gone to the problems of eastern excess, which are indeed major. But the Western stock is going extinct while everyone complains about the east. The problem is overfishing in both places.

The fact is that for years the quota in the West has also been much too high, due to commercial and recreational fishing industry lobbying. And we continue fishing in the spawning area. (Earlier this month I lost a long-running lawsuit against N.O.A.A. to close the Gulf to gear capable of catching bluefins during the spawning season.) It’s all subject to limits but the limits are too high. If they weren’t too high, we would not have the problems. So we have a collapsed western stock and a rapidly declining eastern stock because of greed all around.

U.S. boats have been catching a small fraction of their quota (about 10 to 15 percent of what they’re allowed) in recent years. That percent of the quota will increase as the quota comes down, making things look better. But the quota remains higher than the catch, so the quota is not a limit. It’s like limiting your pasta intake by reducing your limit from 10 pounds of spaghetti per meal to five pounds per meal. Nobody is eating five pounds, so it’s not a limit.

I.C.C.A.T. has always been broken, and the tradition of ignoring the science and insisting on higher quotas was set 25 years ago by Western fishing interests. That tradition remains alive on BOTH sides of the ocean, and the indignant rhetoric by the Western fishing interests masks their own hypocrisy. No country has ever done the right thing toward maintaining these fish, though the U.S. comes closer. But still, the quota will be reduced to a level higher than the catch, so it’s all still meaningless….

The fishing on this side of the ocean is in tatters. The big runs of autumn, the “tuna fever,” the great herds of fish thundering across the blue prairies as they rounded Montauk, that’s all gone. This was by far the worst year ever. But then, that’s true every year. What was different this year was that in addition to bluefin, yellowfins and albacore were nearly absent, too.

What’s really needed is a moratorium for bluefin, and I first said that in 1991. That’s the bluefin situation. I must say that based on their whole history I would have been astounded if I.C.C.A.T. had set an eastern quota that complied with the science. I’m ashamed of what they do, but no longer surprised.

We had a separate discussion about sharks, and one move by the commission that could help one species. But Dr. Safina pointed out how inconsequential that initiative is given the continuing devastation of shark populations in the Atlantic and worldwide.

2008年11月28日 星期五

Wal-Mart Employee Trampled to Death

The throng of Wal-Mart shoppers had been building all night, filling sidewalks and stretching across a vast parking lot at the Green Acres Mall in Valley Stream, N.Y. At 3:30 a.m., the Nassau County police had to be called in for crowd control, and an officer with a bullhorn pleaded for order.

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By 4:55, with no police officers in sight, the crowd of more than 2,000 had become a rabble, and could be held back no longer. Fists banged and shoulders pressed on the sliding-glass double doors, which bowed in with the weight of the assault. Six to 10 workers inside tried to push back, but it was hopeless.

Suddenly, witnesses and the police said, the doors shattered, and the shrieking mob surged through in a blind rush for holiday bargains. One worker, Jdimytai Damour, 34, was thrown back onto the black linoleum tiles and trampled in the stampede that streamed over and around him. Others who had stood alongside Mr. Damour trying to hold the doors were also hurled back and run over, witnesses said.

Some workers who saw what was happening fought their way through the surge to get to Mr. Damour, but he had been fatally injured, the police said. Emergency workers tried to revive Mr. Damour, a temporary worker hired for the holiday season, at the scene, but he was pronounced dead an hour later at Franklin Hospital Medical Center in Valley Stream.

Four other people, including a 28-year-old woman who was described as eight months pregnant, were treated at the hospital for minor injuries.

Detective Lt. Michael Fleming, who is in charge of the investigation for the Nassau police, said the store lacked adequate security. He called the scene “utter chaos” and said the “crowd was out of control.” As for those who had run over the victim, criminal charges were possible, the lieutenant said. “I’ve heard other people call this an accident, but it is not,” he said. “Certainly it was a foreseeable act.”

But even with videos from the store’s surveillance cameras, which were being examined, and the accounts of witnesses, Lieutenant Fleming and other officials acknowledged that it would be difficult to identify those responsible, let alone to prove culpability.

Some shoppers who had seen the stampede said they were shocked. One of them, Kimberly Cribbs of Queens, said the crowd had acted like “savages.” Shoppers behaved badly even as the store was being cleared, she recalled.

“When they were saying they had to leave, that an employee got killed, people were yelling, ‘I’ve been on line since yesterday morning,’ ” Ms. Cribbs told The Associated Press. “They kept shopping.”

Wal-Mart security officials and the police cleared the store, swept up the shattered glass and locked the doors until 1 p.m., when it reopened to a steady stream of calmer shoppers who passed through the missing doors and battered door jambs, apparently unaware that anything had happened.

Ugly shopping scenes, a few involving injuries, have become commonplace during the bargain-hunting ritual known as Black Friday, the day after Thanksgiving, when America’s anxious retailers say they finally turn a profit for the year. The nation’s largest retail group, the National Retail Federation, said it had never heard of a worker being killed on Black Friday.

“We are not aware of any other circumstances where a retail employee has died working on the day after Thanksgiving,” said Ellen Davis, speaking for the group.

Wal-Mart declined to provide details of the stampede or of its security arrangements, which vary from store to store. It was thus unclear how many security workers it had at Valley Stream for the store’s opening on Friday. The Green Acres Mall provides its own security to supplement the staffs of some large stores, but it did not appear that Wal-Mart was one of them.

A Wal-Mart spokesman, Dan Folgleman, called it a “tragic situation,” and said the victim had been hired from a temporary staffing agency and assigned to maintenance work. Wal-Mart, in a statement issued at its headquarters in Bentonville, Ark., said: “The safety and security of our customers and associates is our top priority. Our thoughts and prayers are with them and their families at this tragic time.”

Wal-Mart has vigorously and successfully resisted unionization of its employees. New York State’s largest grocery union, Local 1500 of the United Food and Commercial Workers, called the death of Mr. Damour “avoidable” and demanded investigations by local prosecutors and federal and state agencies.

“Where were the safety barriers?” said Bruce Both, the union president. “Where was security? How did store management not see dangerous numbers of customers barreling down on the store in such an unsafe manner? This is not just tragic; it rises to a level of blatant irresponsibility by Wal-Mart.”

While other Wal-Mart stores dot the suburbs around the city, the outlet at Valley Stream, less than two miles from New York City’s southeastern border, draws customers from Queens, Brooklyn and the densely populated suburbs of Nassau County. And it was not the only store in the Green Acres Mall that attracted large crowds. Best Buy, Circuit City and BJ’s were also mobbed.

Witnesses said the crowd outside Wal-Mart began gathering at 9 p.m. on Thursday. The night was not bitterly cold, and the early mood was relaxed. By the early morning hours, the throngs had grown, and officers of the Fifth Precinct of the Nassau County Police Department, who patrol Valley Stream, were out in force, checking on crowds at the mall, which stretches for a half-mile and has scores of stores.

Mr. Damour, who lived in Queens, went into the store sometime during the night to stock shelves and perform maintenance work. It was not clear on Friday night when or through what agency he had been hired.

By 3:30 a.m., the crowd outside Wal-Mart had swelled, drawn by sales promoting a Samsung 50-inch plasma high-definition television for $798, a Bissel Compact upright vacuum for $28, a Samsung 10.2 megapixel digital camera for $69 and DVDs like “The Incredible Hulk” for $9. The store usually opens at 9 a.m., but in anticipation of a big day, the opening was set for 5 a.m., two hours before sunrise.

About the same time that Mr. Damour was killed, a shopper at a Wal-Mart in Farmingdale, 15 miles east of Valley Stream, said she was trampled by a crowd of overeager customers, the Suffolk County police reported. The woman sustained a cut on her leg, but finished her shopping before filing the police report, an officer said.

A few months ago I found myself at a meeting of economists and finance officials, discussing — what else? — the crisis. There was a lot of soul-searching going on. One senior policy maker asked, “Why didn’t we see this coming?”Skip to next paragraphFred R. Conrad/The New York Times

There was, of course, only one thing to say in reply, so I said it: “What do you mean ‘we,’ white man?”

Seriously, though, the official had a point. Some people say that the current crisis is unprecedented, but the truth is that there were plenty of precedents, some of them of very recent vintage. Yet these precedents were ignored. And the story of how “we” failed to see this coming has a clear policy implication — namely, that financial market reform should be pressed quickly, that it shouldn’t wait until the crisis is resolved.

About those precedents: Why did so many observers dismiss the obvious signs of a housing bubble, even though the 1990s dot-com bubble was fresh in our memories?

Why did so many people insist that our financial system was “resilient,” as Alan Greenspan put it, when in 1998 the collapse of a single hedge fund, Long-Term Capital Management, temporarily paralyzed credit markets around the world?

Why did almost everyone believe in the omnipotence of the Federal Reserve when its counterpart, the Bank of Japan, spent a decade trying and failing to jump-start a stalled economy?

One answer to these questions is that nobody likes a party pooper. While the housing bubble was still inflating, lenders were making lots of money issuing mortgages to anyone who walked in the door; investment banks were making even more money repackaging those mortgages into shiny new securities; and money managers who booked big paper profits by buying those securities with borrowed funds looked like geniuses, and were paid accordingly. Who wanted to hear from dismal economists warning that the whole thing was, in effect, a giant Ponzi scheme?

There’s also another reason the economic policy establishment failed to see the current crisis coming. The crises of the 1990s and the early years of this decade should have been seen as dire omens, as intimations of still worse troubles to come. But everyone was too busy celebrating our success in getting through those crises to notice.

Consider, in particular, what happened after the crisis of 1997-98. This crisis showed that the modern financial system, with its deregulated markets, highly leveraged players and global capital flows, was becoming dangerously fragile. But when the crisis abated, the order of the day was triumphalism, not soul-searching.

Time magazine famously named Mr. Greenspan, Robert Rubin and Lawrence Summers “The Committee to Save the World” — the “Three Marketeers” who “prevented a global meltdown.” In effect, everyone declared a victory party over our pullback from the brink, while forgetting to ask how we got so close to the brink in the first place.

In fact, both the crisis of 1997-98 and the bursting of the dot-com bubble probably had the perverse effect of making both investors and public officials more, not less, complacent. Because neither crisis quite lived up to our worst fears, because neither brought about another Great Depression, investors came to believe that Mr. Greenspan had the magical power to solve all problems — and so, one suspects, did Mr. Greenspan himself, who opposed all proposals for prudential regulation of the financial system.

Now we’re in the midst of another crisis, the worst since the 1930s. For the moment, all eyes are on the immediate response to that crisis. Will the Fed’s ever more aggressive efforts to unfreeze the credit markets finally start getting somewhere? Will the Obama administration’s fiscal stimulus turn output and employment around? (I’m still not sure, by the way, whether the economic team is thinking big enough.)

And because we’re all so worried about the current crisis, it’s hard to focus on the longer-term issues — on reining in our out-of-control financial system, so as to prevent or at least limit the next crisis. Yet the experience of the last decade suggests that we should be worrying about financial reform, above all regulating the “shadow banking system” at the heart of the current mess, sooner rather than later.

For once the economy is on the road to recovery, the wheeler-dealers will be making easy money again — and will lobby hard against anyone who tries to limit their bottom lines. Moreover, the success of recovery efforts will come to seem preordained, even though it wasn’t, and the urgency of action will be lost.

So here’s my plea: even though the incoming administration’s agenda is already very full, it should not put off financial reform. The time to start preventing the next crisis is now.

Baidu.com issued a statement late Tuesday in China saying it has 'removed paid search listings of certain customers, particularly medical and pharmaceutical customers without licenses on file with Baidu,' and that those customers account for about 10% to 15% of total revenue. It said those customers would regain access once they provide licenses.

However the situation plays out, Baidu.com's stock may struggle to recover in a gloomy market. The company's Nasdaq-listed shares fell 25% Monday and were down 4.9% in morning trading Tuesday.

Baidu.com was already under fire over claims in the media and Internet chat forums that it helped some Chinese dairy companies avoid public scrutiny during the tainted-milk crisis, by burying links to critical articles. Baidu.com denies those claims.

All this represents an opportunity for Google, China's No. 2 search engine with a 27.8% market share compared with Baidu.com's 60%.

Baidu.com's shares -- trading at 18.5 times expected 2009 earnings as of Monday's close -- still look expensive. Google trades closer to 13 times expected earnings.

But if the keyword scandal takes root among China's consumers, valuation isn't going to be the deciding factor for Baidu.com's stock price.

2008年11月21日 星期五

Made in Britain

Nov 19th 2008From The World in 2009 print editionBy John Rose

A leading industrialist puts the argument that the time is ripe for a manufacturing renaissance

Getty ImagesBack to the heyday?

Paradoxically, today’s challenging economic conditions provide a unique opportunity for Britain. A fundamental examination of how this nation earns its living is long overdue. The credit crunch could provide the impetus we need to answer a question that has defeated policymakers for more than 50 years: how can manufacturing be encouraged to create wealth as part of a competitive, high-value British economy?

Manufacturing’s problems began with the mis­guided notion that Britain should become a “post-industrial” economy: that we would focus on services and the creation of ideas, with other nations taking on the less attractive task of making the finished product. The results speak for themselves. Manufacturing now generates just 13% of GDP, compared with 32% in 1970.

The credit crisis has exposed the risks of an unbalanced economy. At a recent conference a senior British industrialist, about to address German government and industry representatives on our industrial policy, was introduced as follows: “Our speaker is now going to explain how you run an economy based on real estate.”

These imbalances have also prompted our politicians and commentators to consider seriously, some for the first time, the importance of high-value-added manufacturing in a developed economy. The government has published a new manufacturing strategy; the Conservatives are reviewing their policy towards industry. Our objective as a country must be to build on this work and define the policy and financial mechanisms required to encourage an expansion of manufacturing as part of a more balanced economy. We have to be ruthlessly honest about both the scale of the competition we face and the focused action which other countries are already taking to promote manufacturing.

Stop treating manufacturing as a relic of the industrial revolution

The first priority should be to stop treating manufacturing as a relic of the industrial revolution. High-value-added manufacturing brings huge benefits. It penetrates the economy of the entire country, not just London and the south-east. It pays well but avoids bewildering distortions of income. It drives and enables a broad range of skills and stimulates the growth of serv­ices. In short, it creates wealth.

The benefits are seen clearly in Derby, where around 11,000 people are employed by Rolls-Royce and a further 15,000 in its supply chain. Nearly 12% of the city’s workforce is involved in high technology, the highest figure in the country, and the number of skilled employees is 2.4 times the national average. Derby’s contribution to the British economy, measured by gross value added, is growing faster than that of any other city.

Manufacturing generates over three-quarters of R&D investment made by British businesses. This creates a strong technology base which opens new options for all businesses.

That is why Britain’s decision to proceed with new nuclear is so important: it has the potential to catalyse a manufacturing renaissance. If we can become a nuclear “first mover” we will develop our nuclear capability and supply chain, enabling us to benefit from a growing glo­bal market. This industry also demands a very broad range of skills, from project management to materials science, most of which are transferable to other sectors.

What is true of civil nuclear is true of high-value-added manufacturing more generally. I am struck by the fact that almost all developed and emerging economies have well articulated plans to capture and promote this sort of manufacturing. Britain risks being the only country out of step. We need an economic route map for attracting and retaining high-value-added investment, identifying Britain’s competitive advantages with ruth­less honesty and prioritising both public and private investment accordingly.

This is not about protectionism or “picking winners”. It is simply an acknowledgment that most nations with these goals have a clear strategy for achieving them, with that clarity being part of their competitiveness. Britain’s success in the 2008 Olympics was based on precisely the sort of competitive assessment and focused investment that we must bring to our economic decisions. It has sent a strong signal to aspiring young sportsmen and women. The same will, I submit, be true of the signals sent to young people in education if we bring a similar clarity to addressing our economic competitiveness.

So how do I see British manufacturing faring in 2009? We still retain a strong industrial capability and science base. By setting the right priorities we can develop within a generation a more broadly based economy, with greater resilience and stronger exports. We will see a high-value-added manufacturing sector with deep product knowledge enabling growing services, and renewed demand for science-based subjects in schools and universities. It is entirely feasible that this new direction can be set in 2009 and that today’s economic difficulties will create the right conditions to inform this fundamental shift in attitude and policy.

2008年11月20日 星期四

Commercial warfare

13 October 2006

Nigel Grimwade

Jealousy of Trade

Although every student of international economics is familiar with the theoretical case for free trade first expounded by Adam Smith in the late 18th century, not all will appreciate the ideological battle that Smith and the classicists had to wage to overcome entrenched ideas.

Jealousy of Trade is an excellent book for understanding the politico-economic arguments that raged at that time and against which Smith and others wrote. As economic nationalism seems to be on the ascendancy once again, it is important that scholars and policymakers study how and why such ideas were once contested.

The term "jealousy of trade" was first used by David Hume in a 1758 essay of that title. Earlier, the 17th-century political philosopher Thomas Hobbes wrote of the "Jealousy of the State" in Leviathan to refer to the natural inclination of "kings and persons of sovereign authority" to go to war. Jealousy of trade is the economic counterpart of jealousy of the state. It refers to the "pathological conjunction between politics and the economy" at that time "that turned the globe into a theatre of perpetual commercial war". It is what would be called economic nationalism today.

The goal of Smith and Hume was to show that trade is a reciprocal process in which all countries gain and in which the attempt by one country to make gains at the expense of others is ultimately futile and self-destructive.

The notion of "jealousy of trade" may be viewed as the application of the Hobbesian notion of "reasons of state" - defined as "the primacy of politics in the pursuit of national advantage and princely glory, overriding all moral and legal considerations" - to trade.

The absolutist monarchy in France led the way in applying reasons of state to trade. Under the economic regime of Colbert, Chief Economic Minister under Louis XIV, war and trade were welded into a single policy of political and military aggression. For almost the entire 18th century, Britain and France were "locked in economic and military competition".

Jealousy of Trade is a collection of seven related studies that grew out of Istvan Hont's doctoral thesis at Budapest University and research he directed at Cambridge University. The chapters are tied together by an introduction that explains the historical genealogy of jealousy of trade.

The first chapter explores the relationship between the ideas of Smith and the German natural jurist Samuel Pufendorf, whose notion of "commercial sociability" was borrowed by Smith for his analysis of market behaviour.

This is followed by a chapter that examines how, after the Glorious Revolution of 1688, British neo-Machiavellian political economy was transformed as Britain rose to become the commercial hegemon of Europe.

Britain's success in trade and war led to what Hume regarded as Britain's total capitulation to jealousy of trade.

The third chapter discusses how the issue of whether poor countries gain from trading with rich ones was debated during the Scottish Enlightenment. Hont demonstrates that the theory of comparative advantage, expounded in later decades by David Ricardo, was well understood by the Scottish political economists Hume and Smith.

Hume was a supporter of the parliamentary union established between Scotland and England in 1707 because Scotland as a poor country would gain from free trade with England. No nation, he argued, could develop a monopoly of global trade because poor countries such as Ireland and Scotland would eventually undercut the monopoly and take away its trade. Smith, however, rejected Hume's argument on the grounds that rich countries have a greater abundance of skills so that tasks can be performed in less time and, hence, at lower cost than they could be performed in poor countries.

The next three chapters explore how the regulatory regimes of modern nations were transformed by the rise of hypercompetitive trading states. Much of political economy in the 18th century was taken up with debates about two issues - financial and agricultural reform.

One chapter examines Hume's views on the issue of public debt created as a direct consequence of war and his radical ideas for the state declaring "voluntary bankruptcy" as the solution. In effect, he argued that the war-debt system could be killed off only by applying the politics of necessity and "reasons of state". The next two chapters deal with Smith's advocacy of free trade in agriculture and his programme for reform.

The book's final chapter explores 18th-century thinking about the commercial nation-state. It begins with an outline of Smith's views in The Theory of Moral Sentiments about patriotism and national envy. Smith's alternative was the notion of "national emulation" or "the competitive pursuit of national economic excellence". True patriotism emphasises national economic growth, not conquest and war. The chapter considers how nationalism grew out of the 18th-century concept of national animosity and the 19th-century "principle of nationality", which was expounded by the Italian theorist Giuseppe Mazzini, among others. Hont shows how the principle of nationality, with its emphasis on the nation as a cultural entity based on common ethnicity, became connected with jealousy of trade. This led to the emergence of economic nationalism in the modern sense.

The great value in studying intellectual history is that it can help us to see how earlier generations grappled with issues very similar to those that we face today. This work is essential reading for all who seek to debate the desirability of expanded trade, especially those political leaders who continue to view trade as a zero-sum game.

2008年11月18日 星期二

A British Lesson on Auto Bailouts

PARIS — A faltering auto giant whose brands are synonymous with the open road. Hundreds of thousands of unionized workers with powerful political backers. An urgent plea for the government to write a virtual blank check.

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Cars from G.M.’s German subsidiary, Opel, which is pressing for assistance from Berlin in the form of credit guarantees.

This is not the story of Ford and General Motors, but British Leyland, a car company that went through £11 billion of inflation-adjusted British taxpayer money, or $16.5 billion, in the ’70s and ’80s before going out of business. All that is left of the company now are memories of cars like the Triumph, and a painful lesson in the limited effectiveness of bailouts.

“It’s all too evocative,” said Leon Brittan, a top official in the government of Margaret Thatcher, the free-market-minded prime minister who nevertheless backed the rescue. “I’m not telling the U.S. what to do, but the lessons of the British experience is don’t throw good money after bad. British Leyland carried on for a few more years, but they’re not there now, are they?”

Other experts are sounding the same alarm. “The British Leyland experience is a relevant and cautionary one,” said John Casesa, a principal in the automotive consulting firm Casesa Shapiro Group in New York. “The government got in the business of trying to make a winner out of a structurally flawed company. That’s the risk in the U.S. as well.”

Though Continental automakers have fared better than British ones, Mr. Casesa argues that the long history of government support in Europe made companies like Renault and Fiat strong players in their home markets, but not worldwide.

“With the exception of BMW and Mercedes, European automakers haven’t been globally successful,” he said. “Nor have they been hugely profitable.”

That comparative history is receiving new attention as Congress turns its attention this week to the fate of Detroit.

The British Leyland bailout remains the classic example of a futile government intervention. The tight cooperation between governments and automakers on the Continent has produced happier results.

For half a century after World War II, the French government was the majority stakeholder in Renault, and Paris still holds a 15 percent stake in the company. In the 1980s, the company received a bailout equal to nearly 4 billion euros, or $5.1 billion in today’s money. Now it is highly profitable — at least compared with its American counterparts.

Today, G.M.’s German subsidiary, Opel, is appealing to Berlin for help, seeking more than 1 billion euros in credit guarantees, according to Carl-Peter Forster, G.M.’s European chief.

Monday, Chancellor Angela Merkel of Germany said her government would make a decision before Christmas.

“It’s not decided yet whether these loan guarantees will become necessary,” Mrs. Merkel told reporters in Berlin after meeting with Mr. Forster and other management and labor officials.

“If these guarantees become necessary, those funds should remain within Opel” in Germany, she added, echoing a concern some Americans have expressed that any United States bailout money go only to American automakers.

That has not stopped European automakers from seeking 40 billion euros in loans from the European Investment Bank, ostensibly to help develop cleaner cars.

For Garel Rhys, head of the Center for Automotive Industry Research at Cardiff University in Wales, the trajectory of General Motors is reminiscent of British Leyland not only because of the former’s decision to seek aid to avert bankruptcy, but also for its slow, seemingly inexorable loss of market share. “Both had a history of being the biggest in their market but couldn’t adapt as they lost sales,” he said. “They couldn’t get customers back.”

Historically, British Leyland’s roots stretched back further than Henry Ford’s Model T. The company controlled 36 percent of the British market well into the 1970s, with mass-market brands like Austin and Morris and premium lines like MG and Jaguar. But rising competition from Japanese and German automakers, shoddy workmanship and a breakdown in labor relations brought the company to near bankruptcy by 1975, Mr. Rhys said.

Michael Edwardes, who took over as British Leyland’s chief executive in November 1977, recalled that when he joined, no one even knew whether individual brands were profitable. “It was a farce — no one knew what the costs were,” he said.

As it turned out, every MG the company sold in the United States resulted in a loss of $2,000 for British Leyland.

Wildcat strikes consumed more than 32 million worker-hours in 1977, and the company became a symbol of labor strife, with some employees walking out the door with spark plugs in their coat pockets and engines in the trunks of their cars, Mr. Edwardes said.

Mr. Edwardes immediately began reducing the company’s work force of roughly 200,000 — to 104,000 within five years — and closing 19 factories. He appealed to the Thatcher government for aid, arguing the money was needed if British Leyland was going to be able to afford to lay off workers while investing in new models.

Eventually, the government put up £3.6 billion, equal to £11 billion in today’s money. But the rescue did not do much to preserve British Leyland’s labor force or market share in the long term.

By the time it received its last government infusion of cash in 1988, Mr. Rhys said, British Leyland’s market share had slumped to 15 percent. British Leyland evolved into MG Rover, which was eventually acquired by BMW, then spun off, finally going bankrupt in 2005.

According to Mr. Rhys, just 22,000 workers remain at British Leyland’s successor companies, about 10 percent of its work force in the mid-1970s.

“It was a very poor return,” he said. “We felt collectively and nationally that we got our fingers burnt, and this was always used as a reason to avoid bailouts, both by Labor and Conservative governments in Britain.”

Mr. Edwardes still defends the government aid, arguing it preserved parts of the company that remain in business now — like Jaguar and Land Rover, which were bought by Ford.

Jaguar never made a profit for Ford, however, and was sold with Land Rover to Tata Motors of India earlier this year. Ford recouped only about half of what it paid to acquire the two brands, and is estimated to have poured $10 billion into Jaguar.

Despite the British experience, the case of Renault, which combined fresh money and new management in the 1980s, showed that government bailouts can be beneficial.

The French government help for Renault also came amid increasing losses for the company. But Mr. Rhys said that unlike British Leyland, Renault was able to use the financing to create new car models that were ultimately successful. That, along with tough cost-cutting by a newly installed chairman, cleared the road to profitability by the time the government began privatizing Renault in the 1990s.

If Washington does go ahead and help Detroit, Mr. Edwardes said, it is crucial that the government overhaul the management of the Big Three. “Throwing money at them isn’t enough,” he said. “They need money and they need new management. They need both, not one or the other.”

2008年11月17日 星期一

這是德州政府將資料中心委外經營的苦水

State agencies say $863M IBM deal not paying off

Nov. 16, 2008, 1:01PM

AUSTIN — Many of the state agencies involved in a $863 million IBM Corp. contract to consolidate data centers say they are actually paying more to get less.

Consolidating data operations of 27 state agencies was supposed to streamline storing and protection while saving the state $178 million over seven years. But since the contract began in April 2007, the project has saved far less than anticipated and repeatedly failed in backing up information.

At the Texas Department of Transportation, the agency contends IBM employees have no urgency about or ownership of department business. Problems that used to take state employees less than an hour to fix now take as long as a week.

The agencies have gained an ally in Gov. Rick Perry, who called for work to stop after IBM's failure to back up some critical data came to light. IBM now faces the possibility of losing the contract if the company does not fix the backup problems that have plagued the multimillion dollar project, the Austin American-Statesman reported.

In a Nov. 3 letter to the governor's office, IBM acknowledges the company overreached by assuming responsibility for existing technological conditions that are inadequate, inconsistent and not sustainable.

"The state and IBM will have to evaluate the investments required to remediate the current deficiencies, develop a funding model, and prioritize accordingly," wrote two IBM officials.

IBM spokesman Jeff Tieszen said he could not comment on the letter.

One critic says state officials were unrealistically ambitious by requiring the contractor to move quickly to centralize all the functions of the data centers. The centers all had different equipment and applications, said Jim Moreno, who retired as a system administrator in May after 17 years with the Texas State Library and Archives Commission.

IBM also overreached with an aggressive plan that did not reflect the true cost of the work, critics say.

The consolidation effort was prompted by problems at the agencies' existing data centers. In 2005, those issues led the Legislature to mandate consolidating the data of the 27 agencies.

At the time the contract was signed, the state and IBM said taxpayers would save $25 million over the first two years. An early cost analysis by the accounting firm Grant Thornton showed the project had saved the state about $500,000 overall through February.

But many agencies say cost savings have not materialized for them. Half of the agencies have requested additional money for the 2010-11 budget on top of their current allocations to pay for rising costs under the data center contract.

On Nov. 4, Information Resources gave IBM an official 30-day warning that could lead to termination for cause if the team's persistent failure to back up the agencies' data is not remedied. The department is also developing a contingency plan for ensuring data center services for the agencies without IBM.

2008年11月11日 星期二

Retail Losses Sap a Jobs Safety Net

Circuit City Stores Inc.'s bankruptcy filing Monday underscores how this economic downturn may differ from others in recent memory: The U.S. retail sector is rapidly losing its place as the employer of last resort for the newly unemployed.

Circuit City, the country's second-largest electronics chain, had already announced it would cut 6,800 people as it conducts out-of-business sales at one-fifth of its outlets. On Monday, as it announced it was seeking Chapter 11 bankruptcy protection, it said the number of job losses was likely to rise to 8,000 people.

Circuit City is the latest of at least 14 major retail chains, including Linens 'n Things and Mervyns LLC, to file for bankruptcy protection in the last 12 months. Many, such as Linens, are discovering that they can't find financing and are liquidating, slashing tens of thousands of jobs. Fashion retailer Steve & Barry's entered Chapter 11 bankruptcy this summer with a plan to trim about 100 of its 276 stores; now, according to people familiar with the matter, the company is likely to liquidate the entire chain.

The retail sector employs roughly one of every 10 Americans. But since November 2007, about one in every four lost jobs -- about 320,000 in all -- have been retail jobs.

That has helped push the country's overall unemployment rate to 6.5% through October, a figure which many economists expect to grow to 8% or higher. The unemployment figures do not include about 209,000 retail workers whose full-time hours have been reduced to part-time, according to the Department of Labor.

Traditionally, retail work had been more resilient than other industries in times of recession, with its job cuts often lagging those in other segments. In the 2001 downturn, for example, stores didn't lay off as many workers, or shutter as many stores, because consumers continued to spend.

But in this slowdown, the sector's job losses have outstripped those of other troubled industries such as automotive manufacturing, financial services and hospitality, according to the latest government jobs data. Retail experts believe many of the biggest retail job cuts are yet to come.

In a teleconference last week with financial institutions, the large liquidation firm Hilco Appraisal Services projected 6,100 U.S. stores -- ranging from mom-and-pops to outlets of big chains -- will close in 2008, up 25% from 2007. It estimated that figure could reach 14,000 stores next year, which would be an all-time high. Each store typically employs 20 to 100 full- and part-time workers, say retail experts. That doesn't count the executives who manage the stores, buy merchandise and develop strategy at a corporate headquarters.

Ken Simon, managing director of financial advisory firm Loughlin Meghji + Co., says this downturn could be worse for retailers because of banks' reluctance to lend. 'The credit freeze means a bankrupt retailer will have trouble finding financing to keep even a portion of their stores continuing,' Mr. Simon said.

The layoffs expose the thin economic safety net available for many Americans, who have long depended on a part-time or second retail job to make ends meet. Front-line retail jobs are among the primary sources of employment for those without a college education. For better-educated, full-time employees, retail jobs also filled a void left by the decline of U.S. manufacturers. Retail jobs could become more competitive still as unemployed workers with college degrees enter the market.

'In retail you have large numbers of people who are at or slightly above poverty, so losing employment in that sector can increase poverty levels,' says Ken Jacobs, an education researcher at University of California at Berkeley. 'As manufacturing declined, these were the jobs where people could go.'

2008年11月6日 星期四

With the U.S. election just days away, it has never been more important to consider what the next President must do to keep America competitive. In this time of crisis, Washington has focused on the immediate and the short term. Lost are the more basic questions we really need to worry about: What is the fundamental competitive position of the U.S. in the global economy? And what must we do to remain strong when other nations are making rapid progress?

The stark truth is that the U.S. has no long-term economic strategy—no coherent set of policies to ensure competitiveness over the long haul. Strategy embodies clear priorities, based on understanding the strengths we need to preserve and the weaknesses that threaten our prosperity the most. Strategy addresses what to do, but also what not to do. In dealing with a crisis, experience teaches us that steps to address the immediate problem must support a long-term strategy. Yet it is far from clear that we are taking the steps most important to America's long-term economic prosperity.

America's political system, especially as it has evolved in recent times, almost guarantees an absence of strategic thinking at the federal level. Government leaders react to current events piecemeal, rather than developing a strategy that unfolds over years. Congress and the Executive Branch are organized around discrete policy areas, not around the overall goal of improving competitiveness. Neither candidate has put forward anything close to a strategy; rather, each has presented a set of disconnected policy proposals with political appeal. Both parties contribute to the problem by approaching the economy with long-held ideologies and policy positions, many of which no longer fit with today's reality.

Now is the moment when the U.S. needs to break this cycle. The American economy has performed remarkably well, but our continued competitiveness has become fragile. Over the last two decades the U.S. has accounted for an incredible one-third of world economic growth. As the financial crisis hit, the rest of the American economy remained quite competitive, with many companies performing strongly in international markets. U.S. productivity growth has continued to be faster than in most other advanced economies, and exports have been the growth driver in the overall economy.

THE AGE OF ANXIETY

Yet our success has come with deep insecurities for many Americans, even before the crisis. The emergence of China and India as global players has sparked deep fears for U.S. jobs and wages, despite unemployment rates that have been low by historical standards. While the U.S. economy has been a stronger net job creator than most advanced countries, the high level of job churn (restructuring destroys about 30 million jobs per year) makes many Americans fear for their future, their pensions, and their health care. While the standard of living has risen over the last several decades for all income groups, especially when properly adjusted for family size, and while the U.S. remains the land where lower-income citizens have the best chance of moving up the economic ladder, inequality has risen. This has caused many Americans to question globalization.

To reconcile these conflicting perspectives, it's necessary to assess where America really stands. The U.S. has prospered because it has enjoyed a set of unique competitive strengths. First, the U.S. has an unparalleled environment for entrepreneurship and starting new companies.

Second, U.S. entrepreneurship has been fed by a science, technology, and innovation machine that remains by far the best in the world. While other countries increase their spending on research and development, the U.S. remains uniquely good at coaxing innovation out of its research and translating those innovations into commercial products. In 2007, American inventors registered about 80,000 patents in the U.S. patent system, where virtually all important technologies developed in any nation are patented. That's more than the rest of the world combined.

Third, the U.S. has the world's best institutions for higher learning, and they are getting stronger. They equip students with highly advanced skills and act as magnets for global talent, while playing a critical role in innovation and spinning off new businesses.

Fourth, America has been the country with the strongest commitment to competition and free markets. This belief has driven the remarkable level of restructuring, renewal, and productivity growth in the U.S.

Fifth, the task of forming economic policy and putting it into practice is highly decentralized across states and regions. There really is not a single U.S. economy, but a collection of specialized regional economies—think of the entertainment complex in Hollywood or life sciences in Boston. Each region has its own industry clusters, with specialized skills and assets. Each state and region takes responsibility for competitiveness and addresses its own problems rather than waiting for the central government. This decentralization is arguably America's greatest hidden competitive strength.

Sixth, the U.S. has benefited historically from the deepest and most efficient capital markets of any nation, especially for risk capital. Only in America can young people raise millions, lose it all, and return to start another company.

Finally, the U.S. continues to enjoy remarkable dynamism and resilience. Our willingness to restructure, take our losses, and move on will allow the U.S. to weather the current crisis better than most countries.

Yet what has driven America's success is starting to erode. A series of policy failures has offset and even nullified its strengths just as other nations are becoming more competitive. The problem is not so much that other nations are threatening the U.S. but that the U.S. lacks a coherent strategy for addressing its own challenges.

An inadequate rate of reinvestment in science and technology is hampering America's feeder system for entrepreneurship. Research and development as a share of GDP has actually declined, while it has risen in many other countries. Federal policymakers recognize this problem but have failed to act.

America's belief in competition is waning. A creeping relaxation of antitrust enforcement has allowed mergers to dominate markets. Ironically, these mergers are often justified by "free market" rhetoric. The U.S. is seeing more intervention in competition, with protectionism and favoritism on the rise. Few Americans know that the U.S. ranks only 20th among countries in openness to capital flows, 21st on low trade barriers, and 35th on absence of distortions from taxes and subsidies, according to the 2008 Global Competitiveness Report. We are fast becoming the kind of distorted economy we have long criticized.

Lack of regulatory oversight and capital requirements, in the name of liberalization and well-meaning efforts to extend credit to lower-income citizens, has undermined our financial markets. America underregulates in some areas while it overregulates in others.

U.S. colleges and universities are precious assets, but we have no serious plan to improve access to them by our citizens. America now ranks 12th in tertiary (college or higher) educational attainment for 25- to 34-year-olds. We have made no progress in this vital area over the past 30 years, unlike almost every other country. This is an ominous trend in an economy that must have the skills to justify its high wages. Instead of mounting a serious program to provide access to higher education, like the G.I. Bill and National Science Foundation programs of earlier years, Congress grandstands over the rate of endowment spending in our best universities.

The federal government has also failed to recognize and support the decentralization and regional specialization that drive our economy. Washington still acts as if the federal level is where the action is. Beltway bureaucrats spend many billions of dollars on top-down, highly fragmented federal economic development programs. Yet these programs are not designed to support regional clusters, nor do they send money where it will have the greatest impact in each region. For example, distressed urban communities, where poverty in America is concentrated, are starved of the infrastructure spending needed for job development. Again, no strategic thinking.

At a time when insecurity and job turnover are higher than ever, the U.S. also has abdicated its responsibility to provide a credible transitional safety net for Americans. It is no wonder Americans are becoming more populist, more protectionist, and more tolerant of harmful intervention in the economy. The job training system is ineffective and receives less and less funding each year. Pension security is eroding, and the most obvious step required to strengthen Social Security—slowly adjusting upward the retirement age—has not been taken. Improving access to affordable health insurance is a major worry for all Americans. Washington could take basic steps such as equalizing the tax deductibility of individually purchased insurance to assist those not covered by their employers. Yet the government has failed to do so.

HIGH COSTS, BIG HASSLES

Federal polices have hobbled America's entrepreneurial strength by needlessly driving up the cost and complexity of doing business, especially for smaller companies. Cumbersome regulation of employment, the environment, and product liability needs to give way to better approaches involving less cost and litigation, yet special interests block reform. The U.S. has become a high-tax country not only in terms of rates but also administrative hassle. Infrastructure bottlenecks, due to neglect and poorly directed spending, are driving up costs in an economy increasingly dependent on logistics. The U.S. is energy-inefficient, but public policies fail to promote energy conservation. Health-care costs are too high, but there is no serious effort to provide more integrated and efficient care.

Collectively, these unnecessary costs of doing business, coupled with skill gaps, are becoming significant enough to drive investments out of the country, including investments by American companies. Instead of addressing the real reasons for offshore investment, the parties spar over closing tax "loopholes," even though U.S. corporate rates are among the highest in the world. Where is the strategic thinking?

Trade and foreign investment are fundamental to the success of the U.S. economy, but America has lost its focus and credibility in shaping the international trading system. Our economy today depends on advanced services and selling intellectual property—our ideas, our software, our media. Yet rampant intellectual property theft and high barriers to competition in services tilt the world trading system against a knowledge-based economy.

With no strategy, the U.S. has failed to work effectively with other advanced countries to address these issues and has failed to assist poorer countries so they feel more confident about opening markets and internal reform. The U.S. has abdicated its strategic role in developing Latin America, our most natural trading partner. We have failed to engage meaningfully in Africa, the Middle East, and Asia to help countries improve the lot of their citizens. Our foreign aid is still tied to the purchase of U.S. goods and services, rather than the actual needs of countries. Congress fails to pass trade agreements with countries highly committed to our economic principles, such as Colombia.

A final strategic failure is in many ways the most disconcerting. All Americans know that the public education system is a serious weakness. Fewer may realize that citizens retiring today are better educated than the young people entering the workforce. In the global economy, just being an American is no longer enough to guarantee a good job at a good wage. Without world-class education and skills, Americans must compete with workers in other countries for jobs that could be moved anywhere. Unless we significantly improve the performance of our public schools, there is no scenario in which many Americans will escape continued pressure on their standard of living. And legal and illegal immigration of low-skilled workers cannot help but make the problem worse for less-skilled Americans.

The problem is not money—America spends a great deal on public education, just as we do on health care. The real problem is the structure of our education system. The states, for example, need to consolidate some of the 14,000 local school districts whose existence almost guarantees inefficiency and inequality of education across communities. Instead, government leaders haggle over incremental changes.

SAME OLD ARGUMENTS

We need a strategy supported by the majority to secure America's economic future. Yet Americans hear the same old divisive arguments. Republicans keep repeating simplistic free-market thinking, even though the absence of all regulation makes no sense. Self-reliance is preached as if no transitional safety net is needed. Some Republicans even argue passionately that the country should have no strategy because that would be "industrial policy." Yet the real issue is not picking industry winners and losers but improving the business environment for all American companies, something we cannot do without identifying our top priorities. Overall, Republicans seem to think business can thrive without healthy social conditions.

Democrats, meanwhile, keep talking as if they want to penalize investment and economic success. They defend unions obstructing change in areas like education, cling to cumbersome regulatory approaches, and resist ways to get litigation costs for business in line with other countries. Democrats equivocate on trade in an irreversibly global economy. They seem to think social progress can be achieved only at the expense of business.

To make America competitive, we have to get beyond this thinking. Political leaders, business leaders, and civil society must begin a respectful, fact-based dialogue about our challenges. We need to focus on competitive reality, not defending past policies.

A strategy would address each of the areas I have discussed. If we are honest with ourselves, we would admit the U.S. is not making real progress on any of them today. Efforts under way by both parties are largely canceling each other out. A strategy would direct our spending to priority investments that also put money into the economy, such as educational assistance and logistical infrastructure, rather than tax rebates. With a strategy, we would stop counterproductive and expensive practices such as farm subsidies and spending earmarks.

Is such strategic thinking possible, given America's political system? It happens in other countries—Denmark and South Korea are just two where I have participated in serious efforts by national leaders, both public and private, to come together and chart a long-term plan. This almost never occurs in the U.S., except around single issues.

We will need some new structures to govern strategically. I served on the last public-private President's Commission on Industrial Competitiveness—in 1983! This time we need one that is less politically motivated. Congress would benefit from a bipartisan joint planning group to coordinate an overall set of priorities. More up or down votes on comprehensive legislative programs are needed to allow a shift to a coherent set of policies and away from lots of separate bills.

The new Administration will have an historic opportunity to adopt a strategic approach to the U.S.'s economic future, something that would bring the parties together. America is at its best when it recognizes problems and accepts collective responsibility for dealing with them. All Americans should hope that the next President and Congress rise to the challenge.

Porter, the Bishop William Lawrence University Professor at Harvard Business School, is a leading authority on competitive strategy and the competitiveness of nations and regions. Professor Porter's work is recognized in governments, corporations, nonprofits, and academic circles around the world.

ManagingSTORY-->

The most heated, high-stakes, and divisive Presidential election in recent memory is now over, and on Jan. 20, 2009, the U.S. will welcome Barack Obama as our next President. Even the most diehard Republicans would have to agree that President-Elect Obama ran an outstanding campaign, but Obama's greatest challenges lie ahead: preventing our teetering economy from collapsing, ending a war that most U.S. citizens believe has gone on for far too long, helping more than 40 million uninsured Americans get the health care they need, improving an education system that has long been in disarray, and many more seemingly insurmountable tasks.

To assist Obama in this monumental undertaking, I humbly propose the following code of ethics. Ethical guidelines act as a kind of global positioning system to help us stay on track and, when we get lost, to get back to where we should be. The rules here are based on the principles of ethics (BusinessWeek.com, 1/11/07) that are common to all cultures, all civilized societies, and all religions. Obama, and most of the rest of us, know these rules well, but it can be far too easy to forget about them or put them to the side when it's convenient. There is no better time for a refresher course for our next Commander-in-Chief than as he prepares to assume the Presidency.

1. DO NO HARM.

It isn't just doctors who have an ethical obligation to "first, do no harm." All of us, including (or especially) the President, have such a responsibility. Indeed, it is the most fundamental ethical concept of all, since no society can survive for long if its members willfully inflict damage on other people and suffer no consequences for doing so. Before signing any bill into law or proposing any policy to the public, Obama should ask: "What harm is likely to come from this and how can we avoid it?" Of course, there are circumstances, such as war, in which it is impossible to avoid causing harm. In these situations, the President should seek to minimize harm that is unavoidable.

2. KEEP YOUR PROMISES.

This seems obvious to the point of triviality, but cynical voters (and perhaps those disappointed by the outcome) are already braced for the President-Elect to overlook some of the promises he made on the campaign trail. It's hard to blame the public for such cynicism, since all Presidents to date have either failed to honor at least some of the pledges they made or, as was the case with George H.W. Bush's "no new taxes" pledge, have intentionally broken them. Obama has made a lot of promises, and it is unlikely that he can keep them all, but he should do his level best to keep his word and, when he can't, to explain why.

3. TELL THE TRUTH.

As I've noted previously, Warren Beatty's film Bulworth (BusinessWeek.com, 4/17/08) was a satire based on the apparently ridiculous notion that a politician would dare to speak his mind. But why should honesty in politics be the stuff of comedy? Much has been made of the current Administration's history of playing fast and loose with the truth, but Democratic and Republican Presidents alike have failed to take the duty of veracity seriously. Yes, national security issues sometimes demand that the President not be forthcoming about strategy, but except in such rare circumstances, the President has an obligation to be open and honest.

4. PROTECT PRIVACY.

It is no secret that, for the past eight years, Americans have had their right to privacy compromised significantly. In the name of "winning the war on terror," the government has engaged in wiretapping, has had unfettered access to phone records and e-mails, and more. It is reasonable to question whether such violations of personal privacy are indeed justified.

There are times when our national interest allows, or even requires, the government to obtain private information, but the President cannot be cavalier in sanctioning such actions. President-Elect Obama would do well to remember that freedom for citizens means, in part, freedom from having to worry that our government will be snooping around our computers, phones, and workplaces without having a strong and compelling reason to do so.

5. MANAGE YOUR TIME.

Time management is usually presented as a strategic or organizational concern, but at its core, it is really an ethical one. Time spent on one thing is time that can't be spent on something else, so this valuable resource must be apportioned wisely and fairly (BusinessWeek.com, 2/8/07). After all, in a democracy, the President's time is really our time, and we're entitled to expect that he (or, someday, she) focus on the most pressing concerns. How Obama chooses to spend his time will say a lot about him and his commitment to fairness.

6. APOLOGIZE WHEN APPROPRIATE.

It's a sign of strength, not weakness, for anyone, including a President, to say: "I made a mistake," and to take steps to remedy the situation (BusinessWeek.com, 6/21/07). But when was the last time this actually happened? President-Elect Obama has way too much to live up to, and we should expect him to fail—perhaps even spectacularly so—from time to time. The ethical issue is not whether he will slip up but how he will respond when he does. By taking full responsibility for mistakes in his own judgment, or by those under his watch, he'll be setting a good example for everyone. Most of all, he'll simply be doing the right thing.

7. BE COMPASSIONATE.

Politicians often say: "We're a nation of laws," but we're much more than that. We're a nation of human beings, and the law does not—and cannot—demand that we treat one another with loving kindness (BusinessWeek.com, 2/22/07). But ethics can, and it behooves the President to demonstrate this consistently. Just as a CEO's behavior sets the standard for all employees to follow, the President's conduct either inspires or discourages citizens. Yes, a President is as fallible as the rest of us, but Obama is in a special position to make a positive difference in the world, and the most powerful way to do this is to act with compassion in all that he does. Compassion isn't the only important character trait one can possess, but it's the key to solving problems peaceably.

May President-Elect Obama find the courage to live by these rules every day, no matter how great the obstacles are. May we be inspired to do the same.